It doesn’t take more than five minutes after you meet an entrepreneur just starting a company to notice their zeal and fervor about their new endeavor. They appear extremely passionate about their idea, seem to really enjoy talking about it, know everything about it with impressive detail, and answer questions with great enthusiasm.
They are ready to change the world. Or are they?
You see, what eventually determines who indeed becomes a successful businessman and stands 6 months down the road and who fails gloriously is the 6th minute, when the conversation is no longer about the idea itself and moves towards the intellectual property and, of course, the business plan. It is the replies to questions related to those two important aspects of a business that will allow a mentor, investor, or startup professional to separate the wheat from the chaff.
Writing a business plan.
The necessity of a business plan has been widely talked and written about by an enormous amount of startup bloggers out there. Digging into the Internet, one may even find free business plan templates. One of the best places to start if you are completely clueless as to what you should be doing is the US. Small Business Administration. On this site you will find plenty of information about crafting a business plan, including a simple bare bones business plan, and lots of tutorials to get the engine running.
Nevertheless, despite the amazing plethora of information available online, there are still startup entrepreneurs that make plenty of mistakes when creating their business plan. Some startups take even the mention of a business plan extremely lightly -- as if it is not THE most important thing to do when you are about to start a business.
Let’s be clear. We are not suggesting startup businesspeople put all their time and effort into browsing one site after the other to find information related to business plans. We are simply pointing out the significance of finding a professional with business experience to provide guidance as to how to write your business plan. At least find someone who can help you create an experienced advisory board that will be able to give valuable feedback.
More often nowadays we see business plans with preposterous five-year projections. Business plans without data to support them are useless. And, let’s face it. If you can’t talk with keenness about your numbers and the marketing strategy you intend to follow -- the way you do with your startup idea -- this tells investors that you are trying to swim in the deep sea when you can actually only splash in shallow waters.
Preparing a pitch presentation.
The truth is that for entrepreneurs that have never started a business before, writing a business plan can be a challenge. The Internet can only provide you with a limited amount of help. To get the best outline for your plan -- partnering with a business person that complements your own skills is key. Once you are done with the business plan, it is time to present your offer to investors. Sending them the right pitch will make or break the American dream for you. Play your cards right, and you may secure business deals that could skyrocket your startup.
Below are some key things to know, when you want to send a pitch:
- Know the value of your company (and understand how to value it).
- Do not focus only on the cash you need or the percentage of your startup you are willing to give up for cash.
- Know your game. Investors want to see numbers. They need to see not only the plan for the startup but also data that supports the claims of financial projections and valuation.
- Gear your business plan towards investors. It is them you are trying to convince to believe in your idea and fund it -- not consumers.
- Think about your idea in the context of a business plan rather than a power point presentation. That way, when the Q&A starts, you won’t fall apart - we have seen this far too often.
- Research about what investors in your space will want to hear.
- If you have been in a technical field for several years, seek help from a team member that understands how to prepare a pitch presentation.
Would you hire a person with no marketing experience to develop your marketing strategy? If not, then why would an investor trust you with their money if you can’t show them that you know what you are doing? For that reason, it is critical to have a mechanism for valuing the business.
What worked for someone you know does not mean that it will work for you too.
A business is not a one-size-fits-all proposition. So, you will likely need help to pull this through from a startup business advisor or, even better, an attorney that knows the specifics of your situation. Remember that an attorney consult will also help you if you need to increase your chances of approval for an E-2 Investor Visa.
That aside, a lawyer will help you with the next steps of your startup. Your advisor or attorney can take you through what structure to choose (partnership or corporation). They will also know whether there are important contracts necessary to conduct your type of business (i.e. agreement with co-owner). Of course you will want to be watchful of you intellectual property assets that will be used by the startup. Don't be caught without advise and help when you begin to deal with or confront difficult decisions related to exit strategies and succession.
The extra cost or effort is worth everything if you are detemined to be successful.